AN ASSESSMENT OF EFFECTIVENESS OF ELECTRONIC

FISCAL DEVICES (EFDs) IN ENHANCING TAX COLLECTION IN

TANZANIA:

THE CASE STUDY OF TRA COAST REGIONAL OFFICE

By

SAIDI SHABANI

A Research Report Submitted in Partial Fulfillment of Requirement for Award of

the Bachelor Degree in Accounting and Finance in Business Sector of Mzumbe
University.

2015
 CERTIFICATION
We, the undersigned, certify that we have read and hereby recommend for acceptance by
the Mzumbe University, a dissertation entitled; Assessment of effectiveness of EFD
machines in enhancing tax collection, a case study of TRA- Coast Region, in partial/
fulfillment of the requirements for award of the Bachelor degree of Accounting and
Finance in Business Sector of Mzumbe University

Signature
___________________________
Major Supervisor

Signature
___________________________
Internal Examiner

Accepted for the Board of

……………………
Signature
____________________________________________
DEAN/DIRECTOR,
FACULTY/DIRECTORATE/SCHOOL/BOARD

i
 DECLARATION AND COPYRIGHT

I, Shabani Saidi, declare that this research report is my original work and it has not
been presented and will not be presented to any other University for similar or any other
Bachelor Degree award.

Signature………………………….

Date……………………..

This research report is copyright material protected under the Berne Convention, the
Copyright Act of 1999 and other international and national enactments, in the behalf, on
intellectual property. It may not be produced by any means, in full or in part, except for
short extracts in fair dealings, for research or private study, critical scholarly review or
disclosure with an acknowledgement, without written permission of the School of
Business, on behalf on both the author and the Mzumbe University.

ii
 ACKOWNLEDGEMENTS

My grateful thanks go to Almighty God for creating me as a human being and giving me
enough thinking capacity. I would like show my greatest appreciation to my family for
grateful support in financial and moral support to encourage me to accomplishment my
work.

I am grateful to my supervisor Mr. Francis Rilagonya who was the moderator and
advisor of this report.

I would like to acknowledge my brothers of Finance Department at TRA Coast Regional

office; Athumani Goda (Regional Accountant) and Shamintu Twaha (Assistant
Accountant) for their motivations, cooperation and work-related advice and assistance.
Also I would to acknowledge Mama Bigendo, Mama Kessy, Mama Juliana, Clifford
Kinsi, Mama Saley (Principal Tax Officer) and Fadhili Gonzi

I would to acknowledge my fellow students Paul Chichidodo, Salim Ibrahim, Frank

Sarikoki, Bakari Mkupe, Pirlo Paul, Baraka Masawe and Baraka Torongei for their
cooperation, material sharing and discussions that we have been doing regarding our
researches.

Lastly, I would like to acknowledge my brothers Azizi, Faridi, Adam and Mbaraka for
their time and support throughout the whole time of writing this report

iii
 DEDICATIONS

I dedicate this report to my parents Kalista Temba and Shabani Machinga for raising me
and stand beside me from day one.

iv
 LIST OF ABREVIATIONS

EFD Electronic Fiscal Devices

EFDMS Electronic Fiscal Devices Management System

EFP Electronic Fiscal Printer

ESD Electronic Signature Device

ETR Electronic Tax Register

IMF International Monetary Fund

TRA Tanzania Revenue Authority

VAT Value Added Tax

DRD Domestic Revenue Department

ICT Information Communication Technology

EFCR Electronic Fiscal Cash Register

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 ABSTRACT

The study aimed at assessing the effectiveness of EFD machines in enhancing tax
collection. The study was conducted at TRA Coast regional office. Mainly the research
aimed at assessing the effectiveness of EFD machines in enhancing tax collections.
Specifically the researcher aimed at determining changes in tax collections before and
after the introduction of EFD machines, changes in costs of collecting tax, determining
the performance of TRA Coast before and after the introduction of the machines and the
changes in the extent of time that has been used in processing tax before and after the
introduction of EFD machines. Case study approach was used during the research in
which primary data were obtained via interviews and questionnaire and the secondary
data were obtained from annual reports of TRA Coast, EFD manuals that were prepared
by the Taxpayer Education Office.

The findings have revealed that the EFD machines have led to an increase in the tax
collections of TRA Coast, decrease in the cost of operations in relation to an increase in
the tax collections, increase in the performances by achieving higher percentages of
targets compared to the years in which EFD machines were not in use and decrease in
the time usage in processing the VAT.

vi
 TABLE OF CONTENTS

CERTIFICATION ..............................................................................................................i
DECLARATION AND COPYRIGHT ............................................................................. ii
ACKOWNLEDGEMENTS ............................................................................................. iii
DEDICATIONS ................................................................................................................iv
LIST OF ABREVIATIONS ............................................................................................... v
ABSTRACT ......................................................................................................................vi
LIST OF TABLES ............................................................................................................. x
LIST OF FIGURE .............................................................................................................xi
CHAPTER ONE ................................................................................................................ 1
1.0 Background of the problem.................................................................................................. 1
1.1 Statement of the problem ..................................................................................................... 2
1.2 Research Objectives ............................................................................................................. 3
1.2.1 General objective of the study ...................................................................................... 3
1.2.2 Specific objectives of the study .................................................................................... 3
1.3 Research questions ............................................................................................................... 4
1.4 Significance of the study ...................................................................................................... 4
1.5 Limitations of the study ....................................................................................................... 5
CHAPTER TWO ............................................................................................................... 6
LITERATURE REVIEW................................................................................................... 6
2.0Introduction ........................................................................................................................... 6
2.1 Theoretical Review .............................................................................................................. 6
2.1.1 What is Electronic Fiscal Devices (EFDs)? .................................................................. 6
2.1.2 Why Electronic Fiscal Device? ..................................................................................... 7
2.1.2.1 Benefits to Traders ..................................................................................................... 7
2.1.2.2 Benefits to Buyers ...................................................................................................... 7
2.1.2.3 Benefits to the Government ....................................................................................... 8
2.1.3 What are the types of Electronic Fiscal Devices (EFDs)? ............................................ 8
2.1.3.1 Electronic Tax Register (ETR)................................................................................... 8
2.1.3.2 Electronic Fiscal Printer (EFP) .................................................................................. 8

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 2.1.3.3 Electronic Signature Device (ESD) ........................................................................... 9
2.1.4 What are the features of Electronic Fiscal Devices (EFDs)? ........................................ 9
2.1.5 Who is the user of Electronic Fiscal Devices (EFDS)? .............................................. 10
2.1.6 What are the Rights and Obligations of EFD user? .................................................... 10
2.1.6.1The rights and obligations of EFD user(s) shall be:- ................................................ 10
2.1.6.2 What are the Rights and Obligations of the Supplier? ............................................. 10
2.1.7 What will be the treatment of cost for acquisition of EFDs? ...................................... 11
2.2 Empirical review ................................................................................................................ 12
CHAPTER THREE.......................................................................................................... 16
RESEARCH METHODOLOGY ..................................................................................... 16
3.0 Introduction ........................................................................................................................ 16
3.1 Research Design................................................................................................................. 16
3.2 Area of Study ..................................................................................................................... 16
3.3 Population .......................................................................................................................... 17
3.4 Data Type and Data Collection Methods ........................................................................... 17
3.4.1 Primary data ................................................................................................................ 17
3.4.1.1Questionnaires........................................................................................................... 17
3.4.1.2 Interview .................................................................................................................. 17
3.4.2 Secondary Data ........................................................................................................... 17
3.5 Sample size ........................................................................................................................ 18
3.6 Sampling Technique .......................................................................................................... 18
3.6.1 Judgmental (purposive) sampling ............................................................................... 18
3.7 Data Analysis ..................................................................................................................... 19
3.8 Validity and Reliability ...................................................................................................... 19
3.9 Ethical Responsibilities ...................................................................................................... 19
CHAPTER FOUR ............................................................................................................ 20
DATA ANALYSIS, PRESENTATION AND DISCUSSIONOF FINDINGS ............... 20
4.0 Introduction ................................................................................................................ 20
4.1 Respondents’ characteristics .............................................................................................. 20
4.1.1 Gender distribution of the respondents ....................................................................... 20
4.1.2 Age of the respondents ................................................................................................ 20

viii
Table 4.1: The ages of respondents .................................................................................. 21
4.1.3 Education level of the respondents ............................................................................. 21
Table 4.2: Respondents’ education .................................................................................. 21
4.2 Research findings according to the specific objectives...................................................... 21
4.2.1 Assessment of changes of actual collections before and after introduction of EFD
machines .............................................................................................................................. 22
Table 4.3: The trend of actual collections before and after the acquisitions.................... 22
4.2.2 Assessment of cost trend of collecting tax before and after the introduction of the EFD
machines .............................................................................................................................. 23
Table 4.4: The tax collections trend before and after the introduction of the EFD
machines........................................................................................................................... 24
4.2.3 Research findings of the objective of determining the extent of time that has been
used in processing VAT before and after the introduction of EFD machines ..................... 25
Table 4.5: The effectiveness of the EFDs in processing VAT ......................................... 26
4.2.4 Assessment of TRA Coast performance before and after the introduction of the EFD
machines .................................................................................................................................. 27
Table 4.6: The performance TRA Coast before and after the introduction of the EFD
machines........................................................................................................................... 27
CHAPTER FIVE .............................................................................................................. 29
SUMMARY, CONCLUSION AND RECOMMENDATIONS ...................................... 29
5.0 Introduction ........................................................................................................................ 29
5.1 Summary ............................................................................................................................ 29
5.2 Conclusion ......................................................................................................................... 30
5.3 Recommendations .............................................................................................................. 30
REFERENCES................................................................................................................. 32
APENDICES .................................................................................................................... 35
APENDIX ONE QUESTIONNAIRES FOR OFFICERS ............................................... 35

ix
 LIST OF TABLES

Table 4.1: The ages of respondents .................................................................................. 21

Table 4.2: Respondents’ education .................................................................................. 21
Table 4.3: The trend of actual collections before and after the acquisitions.................... 22
Table 4.4: The tax collections trend before and after the introduction of the EFD
machines........................................................................................................................... 24
Table 4.5: The effectiveness of the EFDs in processing VAT ......................................... 26
Table 4.6: The performance TRA Coast before and after the introduction of the EFD
machines........................................................................................................................... 27

x
 LIST OF FIGURE

Figure: 2.1: Conceptual Framework ................................ Error! Bookmark not defined.

xi
 CHAPTER ONE

1.0 Background of the problem

A lot of debate has been going on in the country between business owners and the
Tanzania Revenue Authority (TRA) on the adoption of Electronic Fiscal Devices to
replace the manual paper system of remitting VAT returns that was considered
inefficient and straining.

Raising more domestic revenue is a priority to the Tanzanian government. Mobilizing

revenue is a way for the government to create a fiscal space, provide essential public
service and reduce foreign aid and single resource dependence (Karongo NBAA, 2014)

Cognizant of that importance, the Tanzanian government through TRA has been
implementing various tax reforms aimed towards broadening the tax bases, enhancing
compliance and improving other aspects of tax revenue administration, and even
improving the quality of services it provides to its stakeholders

To enhance the accountability systems for Value Added Tax, the Tanzania Revenue
Authority has spearheaded the introduction of the Electronic Tax Registers and
Electronic Signature Devices. These devices offer unique benefits to traders and the
Tanzania Revenue Authority in such manner that it cannot be deleted

Electronic Fiscal Device (EFD) means a machine designed for use in business for
efficient management controls in areas of sales analysis and stock control system and
which conforms to the requirements specified under the Value Added Tax (Electronic
Fiscal Devices) Regulations, 2010 and Income Tax (Electronic Fiscal Devices)
Regulation of 2012.

Electronic Fiscal Devices was firstly introduced in Italy by Italian ministry of

Economics in 1980s to keep key financial data such as VAT totals, total turnover and
Owners details for the Tax Authorities

1
Tanzania government introduced EFD system on 1st July 2010 aiming at enhancement of
tax compliance. The system is being implemented in two phases with the first phase
planned to cover all VAT registered taxpayers countrywide.

The second phase is intended to cover Non-VAT registered traders with a turnover
ranging from TSH 14 million and above per year.

The Tanzania Revenue Authority focuses on effective methods of revenue collection so

as to meet the country’s budget revenue targets. The tax base in Tanzania as in most sub-
Saharan African countries is extremely narrow. So, far attempts to increase tax and
revenue have focused on closing the taxation gap and expanding the tax base. The main
policies recommended by the IMF have led to trade liberalization, the transition of sales
tax to a system of VAT (IMF, 2005). Such policies have been adopted by most African
countries with Tanzania being no exception.

The EFDs have been brought forward by TRA in response to weaknesses of using cash
registers in evaluating the VAT payable by many traders, but like most developing
countries, it had to contend with the common problems that plague tax systems of
developing countries ( Karingi and Wanjala, 2005).

However, Yitzhaki (1994) found out that a rise in the tax rate increases the amount of
tax processing costs. The sign of the relationship between efficiency and the method of
processing tax returns and the system of tax collection used by taxpayers is one of the
questions that are still not resolved nowadays. A number of issues can therefore
regarded as possible problems that are faced by taxpayers in processing of their VAT
returns using the Electronic Fiscal Devices

1.1 Statement of the problem

The introduction of Electronic Fiscal Devices in Tanzania was introduced with the main
aim of combating vices that were associated with the tax collection like; tax evasion,
filling of wrong tax returns and claiming of undeserved tax refunds. As much as it was
initially looked from such perspective, a clear analysis has to be made to establish if it
also benefits the traders as well. Earlier indications are that it assists traders in such ways

2
as; saves time initially wasted in pursuing of records. Reduction in tax preparation costs
for example those paid to agencies. Reduction in labor costs e.g. overtime cost. Good
recording keeping increases profits.

Following the same line, Tanzania Revenue Authority (TRA) has recorded an increase
in Value Added Tax (VAT) under the use of Electronic Fiscal Devices (EFDs). It has
been observed that TRA collected a total of Tsh785, 882.4 million in the 2009/2010
financial year, before the EFDs were introduced. By comparison, the Authority collected
Tsh791, 462.9 million in 2010/11 financial year, immediately following introduction of
the devices (TRA website).

However, the adoption of the Electronic Fiscal Devices by the traders as a means of
processing VAT has been a street battle for a long time. Tanzania Revenue Authority
says,” Cost incurred by traders for the purpose of EFDs from approved suppliers for the
first time shall be borne by the Government”. The traders refuse to buy the devices on
the ground that the Government does not offer them for free. Allingham and Sandmo
(1972) introduced the portfolio approach to solve the individual tax cost problem and
showed that, under weak tax processing systems, a number of costs are incurred
.Therefore this may hinder voluntary tax compliance and may result to a decrease of tax
collection percentage. Therefore, it is important to investigate the study intends to assess
the effectiveness of the Electronic Fiscal Devices (EFD) in tax collection in Kibaha
district council.

1.2 Research Objectives

1.2.1 General objective of the study

The general objective of the study is to assess the effectiveness of Electronic Fiscal
Devices in enhancing tax collection in Tanzania.

1.2.2 Specific objectives of the study

In order to achieve the general objective the following specific objectives must be
examined

3
 i. To assess the trend of actual collection of tax before and after the introduction of
EFDs in Coast Region
ii. To determine the cost trend of collecting tax before and after the introduction of
EFDs
iii. To determine the extent of time that have been spent on processing VAT before
and after the introduction of the EFDs
iv. To assess the performance of TRA Coast before and after the introduction of the
EFD machines

1.3 Research questions

i. Are there any changes in actual collections of tax before and after introduction of
EFDs in Coast Region?
ii. Are there any changes in costs associated with tax collections before and after
introduction of EFDs in Coast Region?
iii. Are the any changes on time spent on processing VAT before and after
introduction of the machines?
iv. What are the factors that affect the effectiveness of EFD machines in enhancing
tax collection?

1.4 Significance of the study

The study will help the researcher to meet the requirement of earning a bachelor degree
of Accounting and Finance at Mzumbe University.

The study will create knowledge to the researcher and other users of the report on
understanding the sensitization and enforcement on the use of EFDs in recording sales
transactions and how the machines have brought changes on tax collected before after
the introduction of the devices.

Furthermore the study will broad up the understanding of the EFDs in processing VAT,
impact of the tax collection after the introduction of the devices by the TRA and the way
forward to it.

4
The study will be an empirical work for other researchers to work furthermore on the
matter and any related to it.

1.5 Limitations of the study

During the study the researcher came across the following obstacles;

The researcher faced an obstacle on the empirical works that have been done by other
researchers on EFD machines in Tanzania. This has forced the researcher to use most of
empirical works that have been done outside the countries boundaries such as Kenya and
America.

Busyness of the compliance and monitoring officers limited the capacity of the
researcher on obtaining enough time to conduct interviews with most of them regarding
the study.

5
 CHAPTER TWO

LITERATURE REVIEW

2.0Introduction
This chapter aims at widening the topic by reviewing and open up each definition,
concept, theory and related research reports that relate with the topic that have been done
previous by other researchers. The literature review will create a way forward by
gapping the researchers done.

2.1 Theoretical Literature Review

2.1.1 What is Electronic Fiscal Devices (EFDs)?

Electronic Fiscal Devices (EFD) is a machine designed for use in business for efficient
controls in areas of sales analysis and stock control system. EFDs are intended to do
away with manual receipting and invoicing among the taxpayers. Electronic Fiscal
Devices (EFD) are small machines or minicomputers that are used to determine the
amount of Value Added Tax remitted to the government (Niosi 1994)

Administration of EFDs

The system has been implemented in two phases, the first phase started July, 2010. It
involved taxpayers registered for VAT with annual taxable sales above Tshs. 40.0
million. The second phase of EFD will cover non VAT registered traders with a yearly
turnover of above Tshs. 14.0 million.

Users of EFDs are supposed to issue fiscal receipts/invoices, keep records of all
transactions and ensure that at the end of the day all sales are transmitted to TRA
through “Z” reporting system.

TRA has been conducting sensitization campaign to taxpayers and the general public on
importance of issuing EFDs receipts/invoices upon sales and demanding EFDs receipts
on purchases. Taxpayers who fail to acquire and or use EFDs accordingly to the laws
will be penalized accordingly.

6
2.1.2 Why Electronic Fiscal Device?
According to TRA EFDs manual (2013) the following are the advantages to the traders,
government and buyers

2.1.2.1 Benefits to Traders

a) EFDs provide business security for traders as all information entered into the
machine is stored in a fiscal memory that cannot be altered.
b) Traders can keep track of all business transactions.
c) Enhances fairness in tax assessment since all tax information’s are automatically
transmitted to TRA system.
d) Modern way of keeping records after immigration from manual register.
e) Provides for easy retrieval of sales report on daily, weekly or monthly basis.
f) Provides for permanent storage of data
g) A trader can use EFD machine for other services such as affecting payment and
as a communicating tool.
h) Simplifies refunds as information is contained in fiscal document.
i) Reduces number of objections and disputes
j) Minimizes pilferage commonly practiced by shop attendance.
k) Easy to operate in dual language (Swahili and English)

2.1.2.2 Benefits to Buyers

a) The receipts issued by EFD machine provides for legal benefit of ownership of
goods procured.
b) Provides for assurance that the tax has been remitted to the Government
c) Taxes paid by consumers of goods and services enables the Government to
provide social and economic needs
d) Demanding for receipt is a legal obligation of the buyer hence by acquiring a
receipt a buyer will have fulfilled the requirement of the law and therefore being
penalized.

7
2.1.2.3 Benefits to the Government
a) Taxes collected through EFD enables the Government to provide social and
economic needs
b) Provides basis for fair assessment
c) Easy monitoring of taxes
d) Provides for collection of taxes in a cost effective way
e) Enable the Government in economic planning and revenue forecasting by
sectors.

2.1.3 What are the types of Electronic Fiscal Devices (EFDs)?

There are various types of EFD in use depending on the nature and types of businesses.
Rathus and Nevid (1987) identify four types of fiscalised electronic devices, which
comprises of electronic cash registers (ECRs), electronic Tax registers (ETRs), fiscalised
printers (FPs) and electronic signature devices (ESDs).However, and the commonly
used EFDs are:

2.1.3.1 Electronic Tax Register (ETR)

Rathus and Nevid (1987) define electronic tax registers as cash registers with fiscal
memory, which is a special, read only memory built into the cash register to store tax
information at the time of sale. The device is an appropriate and commonly used by
retail business that issue receipts manually, alternatively known as Electronic Fiscal
Cash Register (EFCR). The device may be used as a stand-alone as it keeps totals in a
fiscal memory and print retail receipts using an in –built printer. Example of users of this
device includes small retailers of all types of businesses.

2.1.3.2 Electronic Fiscal Printer (EFP)

According to Sumila (2012) the device is commonly used by computerized retail outlets.
The device is connected to a computer network to store every sale transaction made in
its fiscal memory as the user issues receipts to customers. It is basically similar to
printers that are currently used in supermarkets, except for the fiscal memory. Example
of users of this kind of device includes Supermarkets, Petrol Stations, and Ticketing etc.

8
2.1.3.3 Electronic Signature Device (ESD)
Such a device is used by computerized businesses that issue receipts or invoices via
special accounting software e.g. tally, micros Fidelio etc. The device is designed to
authenticate by signing any personal computer (PC) producing financial document such
as tax invoice. The devices uses a special computer program to generate a unique
number (Signature) which is appended and printed to every invoice issued by the user’s
system. The number is unique such that no two numbers can be similar therefore making
it easy to distinguish between authentic and fake invoices. In addition to this, the number
permanently stored in the memory for audit purpose against the copies of the invoices
stored in the computer system.

It is also an authority key for the user’s computer functionally without which the PC
cannot save or print any document.

Examples of users of this device includes; Manufacturers, Wholesalers and the like

2.1.4 What are the features of Electronic Fiscal Devices (EFDs)?

EFDs used in Tanzania have unique features that allow EFD Users to benefit more from
the usage of the machines and TRA to easily manage the project (Karongo, 2014). The
features are;

i. In-built Fiscal Memory which cannot be erased by Mechanical, Chemical

or electromagnetic interferences.
ii. Automatically self-enforcing issuing of daily “Z” report after every 24
hours; Hence print “Z” report before any configuration change
iii. Transmits tax information to TRA system automatically
iv. Has irreversible date mechanism
v. Issues fiscal receipts/invoice which is uniquely identifiable
vi. Can be used as a stand-alone and configured into a network
vii. Has at least 48 hours power backup, and it can also use external battery in
areas without electricity supply
viii. Save configured data and records on permanent fiscal memory
automatically
9
 ix. Has tax memory capacity that store data for at least 5 years or 1500 days
of transactions
x. Protected memory that cannot be easily modified
xi. Intrinsic protection against unauthorized action
xii. Password uniquely used by the use

2.1.5 Who is the user of Electronic Fiscal Devices (EFDS)?

The system is used by both the VAT registered traders and the NON-VAT traders whose
annual turnover amounting to Tshs 14 million and above. The taxpayers include
mentioning a few manufacturers, wholesalers, retailers of all kinds. Other taxpayers
appointed by the commissioner to be eligible person for EFD.

2.1.6 What are the Rights and Obligations of EFD user?

According to TRA EFDs manual (2013) the following are the rights and obligations of
the users, traders and suppliers of the EFDs

2.1.6.1The rights and obligations of EFD user(s) shall be:-

i. To be free to procure and purchase electronic fiscal devices from any approved
supplier
ii. Connect their electronic fiscal devices to the system and ensure that all their
business transactions are electronically transmitted into the system through their
electronic fiscal devices
iii. Issues fiscal receipts or invoices generated by his Electronic Fiscal Device for
the consideration paid to him for supplies made to the customers
iv. Acquire, keep, handle and use electronic fiscal devices, users must strictly
exercise due diligence and duty of care as prescribed by the approved
manufacturer’s electronic fiscal devices operational manuals.
v. Report any operational failure, to the supplier within a period of twenty four
hours

2.1.6.2 What are the Rights and Obligations of the Supplier?

Under the system the suppliers of EFD machines have the rights and obligations to:-

10
 i. Submit sample of EFD model, accompanied with relevant device operations
manuals, to the commissioner for test and approval prior to selling and
distribution to intended users.
ii. Apply for users’ identification number from the commissioner.
iii. Sell and distribute the EFD to the users in mainland Tanzania
iv. Train users on the best ways to administer the EFD
v. Submit to the Commissioner the monthly returns of EFD distribution report,
detailing devices sold/distributed to users.
vi. Supply spare parts, accessories support and maintenance of EFD.
vii. Ensure provision and availability of qualified technicians for maintenance of
EFD when required.
viii. Correct the malfunctions of the machines within 48 hours of reporting time.
While ensuring the data is restored to the original state before such malfunction
occurred and give report forth with.
ix. Open branch offices in various regions. Within malfunction so as to reach
customer easily for efficient and effective discharge and management of his
obligation stated under sub-regulation (1) of regulation 8 of EFD Regulation
2010 and regulation of the EFD Regulation 2012.
x. Install, configure and activate the supplied EFD at users’ premises.
xi. During installation of EFD the supplier must provide an inspection booklet for
each EFD supplied.
xii. Support and maintain the supplied EFD at user’s premises to ensure a smooth
operation. Guarantee for maintenance is three years from the date acquiring and
use the EFD machine.
xiii. Submit to the commissioner details of the supplier’s approved technicians
xiv. Report to the commissioner on any misuse or abuse of the device by the user.

2.1.7 What will be the treatment of cost for acquisition of EFDs?

Cost incurred by traders for the purpose of EFDs from Approved Supplier for the first
time shall be borne by the government. EFDs are exempted from all taxes and duties.

i. VAT Registered Traders

11
 The cost of the machine shall be set off from the output tax on submission of the
VAT return, one month following the month of the purchase under normal
refund system. The entire cost of the machine is treated as input tax and shall be
claimed under normal input tax claim procedures.
ii. Non VAT Traders
As a general principle, and in order to minimize the time period of recouping the
cost of acquiring EFDs, all users of EFDs are allowed to deduct the cost of
acquisition and treat as business expense, hence treat as allowable deduction.
Such deduction has to be made within the period of one year.

2.2 Empirical review

Martin et al (2010) conducted a study to assess the effectiveness of the ETR in
processing Value Added Tax return in Kisii Town. Firstly, found the introduction of the
ETR has assisted in cutting cost that the business used to incur in processing VAT.
Secondly, it was found that ETRs have enhanced the revenue collection resulting from
sound sales and stock audits. Also to evaluate the effectiveness of ETRs in filling VAT
returns at regular intervals, it was found that the use of ETRs was not a waste of funds
and has assisted the business in many ways. The population under the study comprised
of ninety eight VAT registered who are services providers, wholesalers and large scale
retailers. The main instrument of collecting data was questionnaire while the secondary
data was obtained KRA regional office. Analysis of the data was mainly done using
descriptive statistics.

Also, Weru et al (2013) researched on the introduction of electronic registers for

enhancement of tax collection at Kenya Revenue Authority. The study was to establish
the effect of the change caused by implementation of the ETR system enhanced the tax
collection in Nairobi. The target population was 500 traders along Lithuli Avenue in
Nairobi and ninety eight managers in the Department of Domestic Taxes. The major
findings indicated that the ETR system had enhanced tax collection in business premises
in Nairobi and that the system had to a great extent assisted in sealing loopholes of tax
evasion in Nairobi. It was further found out that the stakeholders were yet to be trained
effectively on the use of ETR machines. The system had also assisted in improvement
12
on tax compliance. It was however established that the system is yet to be fully
institutionalized in the KRA system nevertheless the study established that the authority
is still experiencing some resistance to change from both internal and external
customers.

Burkhardt and Marlene (1994) argue that technological change has become the mode of
operation in the 20th century business community. As the workplace product transforms
from paper to information services, employers and employees scramble to keep abreast
of the rising tide of information and the new service opportunities created by the
innovations in the technology available to business.

Cascio (1986) states that electronic device processing methods make use of computers in
determining the amount of tax to be remitted to government. He further argues that this
method is more reliable and fast as compared to the manual data processing method.
Electronic device processing method is less time consuming, less costly, more accurate
and faster as compared to the manual data processing method.

According to Liden and Adams (1992), older employees usually favor the use of manual
methods in determining the value of tax while the younger employees usually favor the
use of electronic devices citing the above benefits. They went on to say that younger
generations usually have positive attitudes towards the use of electronic devices while
older generations have negative attitudes towards the use of electronic devices.

A study by Arthur, Winfred and Hart (1990) identified a positive relationship between
educational ability and familiarity with these electronic devices. The authors suggested
that employees with low educational ability levels might consciously opt not to become
familiar with these electronic devices due to the challenging nature of the technology

A study by Gardner, Dukes and Discenza (1993) identified a positive correlation

between experience with electronic devices and attitudes towards them. Not
surprisingly, negative experience with these electronic devices correlated with negative
beliefs and attitudes towards the technology. Employees with positive experience also
espoused positive attitudes towards the devices.

13
Sacks (1991) developed a theory, which advocates that males tend to display positive
attitudes towards the use of these devices, regardless of the level of familiarity, while
females’ attitudes become more positive as the levels of familiarity increases.

Research study conducted in Kenya by the Kenyan Revenue Authority on the

effectiveness of electronic tax registers in the processing of Value Added Tax returns
concluded that about 91% of organizations in the motor industry in Kenya have acquired
these devices and employees who work for these companies have developed positive
attitudes towards these devices. This implies that 9% of companies were still using the
manual methods of determining the value of added tax. The research went on to give
reasons why some companies were not adapting to the use of electronic devices and the
reasons were that some organizations had limited knowledge and resources to adapt to
the policy. The research study also concluded that the time filling of the monthly Value
Added Tax is attributed to many factors of which electronic tax registers are one of the
factors. The research study discovered that about 70% of companies in Kenya supported
the idea that electronic Tax registers improves sales audits for the business. The research
study also cited that about 66% of employees qualified the use of electronic devices in
business as having accrued many benefits to their business, citing the following reasons
ranging from: increased efficiency in sales audit, increased sale collection, increased
efficiency in stocktaking and easy VAT processing leading to less risk of prosecution.
The research also purports that 90% of businesses in Kenya agreed that electronic
devices led to timely preparation of reports which led to an increase in returns and fast
and efficient ways of processing information. This, by any standards indicates that the
Kenyan companies show positive attitudes towards the use of electronic devices.

Koohang (1989) advocates that people of varying backgrounds often have different
beliefs and values system which give rise to dissimilar attitudes. Therefore, varying
backgrounds and beliefs systems contribute to an individual’s attitude towards
technology. Belief systems also contribute to attitudes towards innovation adoption rate.
Koohang (1989) concludes that there is a positive correlation between favorable
attitudes towards new technology and computer familiarity, meaning that employees that
are computer familiarity will produce positive attitudes towards the use of electronic
14
fiscal devices and on the other side employees that are not computer familiarity will
produce negative attitudes towards the use of these devices.

Northcraft (1996) postulates that the effects of introducing new technology on attitudes
and perception is more positive when employees are given enough time to become
familiar with the technology in a risk free environment. Both satisfaction levels and
feelings of expertise were positively related to the user’s perception of having control of
the environment pertaining to interfacing with the technology.

Anna (2006) carried a research on the attitudes towards the use of electronic invoicing
by financial managers in small to medium sized companies in Finland. Questionnaires
were used and out to 200 companies only 143 replies were received which showed a
72% respond rate. The respondents were more inclined to have a positive attitude
towards electronic invoicing as they were found working for companies having websites
that is, they were used in working electronically. The result of the study showed that the
attitudes towards electronic invoicing were positive. The study reflected that out of the
143 questionnaires which where responded to 70% favored the use of electronic devices
while 30% were not familiar with these electronic devices. There were some concerns
regarding the cost and safety of using electronic invoicing but the majority of the
respondents believe that using electronic invoicing was beneficial.

15
 CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction
This chapter covers research design, the area of study, targeted population, sample size
to be studied, methods of through which data will be collected, analyzed and presented.
Research methodology is a way to scientifically solve the research problem, in it we
study the various steps that are generally adopted by a researcher in studying his
research problem along with the logic behind them (Kothari, 2004)

3.1 Research Design

According to Ndunguru (2007) the type of approach to use depends mostly on the
purpose of the study and nature of the data available. The research will employ case
study approach to collect data. Msabila and Nalaila (2013) argues that the mixed
design/critical research design is the design for the researches which are evaluative in
nature focusing on examining strengths and weaknesses of a certain system or practice
mechanism. This is certainly makes the approach effective in investigating the
effectiveness of the EFDs machines in enhancing tax collection in Tanzania.

3.2 Area of Study

Area of study is a place where the research is being conducted and from which the
conclusions and recommendations are based upon.

This study has been conducted in TRA Coast regional office which is located in Kibaha
district. Kibaha District is one of the 6 districts of the Coast region, Tanzania. The
district is bordered to the North by the Bagamoyo District, to the East by Dar es Salaam,
to the South by the Kisarawe District and to the West by the Morogoro Region.
According to the 2002 Tanzania National Census, the population of the Kibaha District
was 132,045

16
3.3 Population
The population of the study was the employees of TRA regional office of Coast region
who are in compliance and monitoring section, finance department and managers.

3.4 Data Type and Data Collection Methods

In order to evaluate the effectiveness of EFDs machines in enhancing tax collections
primary and secondary data have been collected and used for analysis.

3.4.1 Primary data

The primary data are those which are collected afresh and for the first time, and thus
happen to be original in character (Kothari, 2004). The primary data has been collected
from primary sources such as compliance and monitoring officer, finance officers and
the managers. The data have been collected using these two methods:-

3.4.1.1Questionnaires
Best and Khan (1981) state that a questionnaire is a data gathering instrument through
which respondents answer questions or respond to statements in writing, The method is
used when factual information is desired. The questionnaire included open questions to
save time and open handed questions which were set out for obtaining further
information on the EFD machines.

3.4.1.2 Interview
Saunders (2003) asserts that interview involve direct personal contact between the
researcher and the participants. The formal interviews with the regional accountant and
the district in charge have been applied to obtain information that suits the research
questions.

3.4.2 Secondary Data

Secondary data are those data which have already been collected by someone else and
which have been passed through the statistical process (Kothari, 2004). The secondary
data have been obtained from the annual tax collection reports from 2009/2010 to
2012/2013 and EFD machines’ manuals that have been prepared by Taxpayers
Education department.

17
3.5 Sample size
Sample is a segment of the population selected to represent the population as a whole
(Kothari, 2004). The study has involved the following respondents for Kibaha District
and TRA. The researcher used finance officers as the respondents because they prepare
annual budgets of expenditures and compile all the expenditures that have been
completed also they prepares the tax collections periodically from weekly to annually
and therefore were essential on obtaining data regarding collections of tax. Compliance
officers and managers were essential to the study due to their participation on the
enforcement of the laws including EFD machines.

Table: 3.1: Sample size

S/NO RESPONDENTS Sample Population

1 Finance officers 2 2
2 Managers 1 3
3 Compliance officers 16 25
Total 19 30

Source: Compiled from the survey

3.6 Sampling Technique

Kothari (2006) defines sample technique as a definite plan for obtaining a sample from a
given population. It refers to the technique or the procedure the researcher would adopt
in selecting items for the sample. The unit of sample has been selected by using
judgmental (purposive) sampling.

3.6.1 Judgmental (purposive) sampling

This is a type of sampling technique where by the researcher chooses the sample by
using his judgment. This technique of sample selection provides the chance for
respondents from each units of inquiry to give their views about related matters
concerning EFD machines. In this research judgmental sampling technique was used
because samples were selected according to their suitability in relation to the study. For
example Accountants who have the records of tax collections and costs associated with
the collections of it.
18
3.7 Data Analysis
According to Gay (1992) the most common method of reporting a descriptive research is
by developing frequency distribution, calculating percentage and tabulating them
appropriately. Therefore descriptive statistics have been used in data analysis and Excel
has been used in analyzing data.

3.8 Validity and Reliability

The researcher has conducted a pilot study before the main data collection. The piloting
has been carried out in TRA Coast office. The researcher selected five traders through
purposive sampling and has administered the questionnaires to them. This has helped to
establish the reliability and validity of the research instruments

3.9 Ethical Responsibilities

The data that have be collected from the study through observing tax reports and files,
questionnaires and interviews will be strictly used for academic purposes. That is, the
study will be partial fulfillment of the requirement for the award of undergraduate
degree at Mzumbe University.

19
 CHAPTER FOUR

DATA ANALYSIS, PRESENTATION AND DISCUSSIONOF

FINDINGS

4.0 Introduction
This chapter covers the findings, analysis and discussion of data collected from
questionnaires and annual reports. The findings are based on the information collected
from Coast regional office. The presentations has based on answering the specific
objectives of assessing the effectiveness of EFD machines in enhancing tax collection.

4.1 Demographic characteristics of respondents

This part covers the general attributes of the respondents to whom the questionnaires
were administered and answered them. The general characteristics assessed include
gender, age and education level of each respondent.

4.1.1 Gender distribution of the respondents

The study comprised of 19 respondents. Out of 19 respondents, 63.2% were females and
36.8% were males. Most of the respondents were males because all the accountants are
males, blocks manager and assistant regional manager audit are all males. Most of the
females who are in compliance and monitoring section were not present for school
reasons and other were in a holiday.

4.1.2 Age of the respondents

The study comprised of 19 respondents who belonged in the following age ranges, 18-29
has 26% of the sample, and 30-39 has 37%, 40-49 6% and 50-above 32%. This implies
that most of the TRA officers are in the ages of 30-39 who are actively performing their
duties and that their responses to the questionnaires were thoroughly based on the EFD
machines

20
Table 4.1: The ages of respondents
Age range Number of respondents Percentage
18-29 5 26%
30-39 7 37%
40-49 1 6%
50-Above 6 32%
Total 19 100%
Source: Researcher’s own data-2015

4.1.3 Education level of the respondents

In this study it was found that out of 19 respondents, 84% of them have University
degree and 16% of them have diplomas. This implies that the questionnaires were
answered by the people who have higher level of measuring and giving weights to
different scenarios before making decisions. That is, the responses of the objectives have
logics and facts based on the EFD machines.

Table 4.2: Respondents’ education

Level of education No of respondents Percentage
Primary - -
Secondary - -
Certificate - -
Diploma 3 16%
Degree 16 84%
Total 19 100%
Source: Researcher’s own data-2015

4.2 Research findings according to the specific objectives

During the study the researcher obtained information that answers research questions
through interview, distributing questionnaires and reading the annual reports of previous
years. The findings provided answers to the following research questions;
i. Are there any changes in actual collections of tax before and after introduction of
EFDs in Coast Region?

21
 ii. Are there any changes in costs associated with tax collections before and after
introduction of EFDs in Coast Region?
iii. Are the changes on time spent on achieving tax collections targets before and
after introduction of the machines?
iv. What are the factors that affect the effectiveness of EFD machines in enhancing
tax collection?

4.2.1 Changes of actual collections before and after introduction of EFD machines
In assessing the changes the actual collections of before and after the phases of using the
EFD machines, the researcher had compiled the direct taxes, indirect taxes, changes and
their percentage change in order to determine the effectiveness of the machines.

Table 4.3: The trend of actual collections before and after the acquisitions
Year Direct Taxes Indirect Taxes Total collections Revenue Growth % Change
of Revenue
Collection
2009- 4,493,439,323.20 1,638,688,150.42 6,132,127,473.62 - -
2010
2010- 5,852,180,214.34 2,170,701,671.32 8,022,881,885.66 1,890,754,412 30.8%
2011
2011- 6,404,257,066.17 2,408,202,614.05 8,812,459,680.22 789,577,794.5 9.8%
2012
2012- 7,648,016,707.61 2,937,330,874.98 10,585,347,582.59 1,718,910,000 19.4%
2013
Source: TRA Coast Annual Reports

According to the table above there are positive changes in the actual collections after the
introduction of the EFD machines. There are positive changes due to the following
reasons; the EFD machines have started being used in the year of 2010/2011 in which
the annual collection increased by 30.8% from the previous year in which annual
collection was 6,132,127,473.62. In the year of 2010/2011 the target was 7,
537,700,000/= the annual collection went above the target. The good performance was
attributed by the following factors:

22
 i. Enforcement of Electronic Fiscal Devices (EFDs). For the period of October
2010 to June 2011, 65 taxpayers were registered as EFD users out of 69 active
VAT taxpayers and a total of 59,739,520/= were compounded for non-compliant
taxpayers
ii. Enhanced implementation of departmental strategies including registration of
new taxpayers, block management, motor vehicles tax campaigns, quality audit
conducted during the period and close follow up of tax arrears.
iii. Frequent patrols, conducted during the period under review which enhanced
compliance.

Following the same line, in the year of 2011/2012 the total collection increased by 9.8%
which is relatively lower compared to increase in the year of 2010/2011. Despite of
lower proportionate increase, 20 EFD users were registered and a total fine of Tshs.
114,810,784 was compounded for non-compliant taxpayers. The underperformance was
not brought by the introduction of the EFD machines but the following were the major
reasons for underperformance of DRD department;

i. Four taxpayers with huge amounts of 426,142,835/= in total were untraceable

and therefore the tax in arrears could not be collected.
ii. Three secondary schools namely Msangani, Pwani and Kaole were unable to pay
their liabilities amounting to Tshs. 168,986,498/= due to financial hardship.
iii. Hotel industry performed below the expectations due to low season and some
hotels closed their operation especially for the last six months of the period under
review hence led to underperformance of indirect taxes.

Following the same line, in the year of 2012/2013 the collections increased by 19.4%
compared to the year of 2011/2012. This has been attributed by the increase of EFD
users to 94 out of 117 taxpayers this resulted to a performance rate of 80.34%. Also a
total of Tshs. 58,893,044/= was compounded for non-compliant taxpayers.

4.2.2 Cost trend of collecting tax before and after the use of the EFD machines
The researcher aimed at assessing the effectiveness of the EFD machines by checking
the costs of collecting tax before and after the machines started to be used. Therefore
23
according to the research objective of determining the cost trend before and after
introduction of the EFD machines the following has been observed from the annual
reports;

Table 4.4: The tax collections trend before and after the introduction of the EFD
machines
Year Tax Expenditures Tax Collections
Actual costs %Change in costs Actual collections %Change in
collections
2009/2010 331,696,300 47% 6,132,127,473.62 5.9%
2010/2011 368,993,755 11.2% 8,022,881,885.66 30.8%
2011/2012 406,262,418 10.1% 8,812,459,680.22 9.8%
2012/2013 427,741,300 5.3% 10,585,347,582.59 19.4%
Source: TRA Coast Annual report

According to the table above changes have been observed on the cost of collecting tax.
Before the introduction of EFD machines TRA Coast spent Tshs. 331,696,300/= in the
year of 2009/2010 which was equal to an increase of 47% compared to the year of
2008/2009 while the percentage increase of tax collection was 5.9%. It has been
observed that one year before the EFD machines started to be used TRA Coast
experienced higher percentage increase in the cost of collecting tax than the actual
increase of tax collection. The increase of these costs has been reported to be brought by
the following reasons;

i. The districts in the Coast region are very scattered (Bagamoyo, Kisarawe, Mafia,
Mkuranga and Rufiji). The staff from regional office had to visit and conduct
physical survey/ block management to assess/ registered taxpayer. For example
Rufiji Selous camp is 300 Km away from Kibiti (Rufiji). Therefore staff
travelling local fuel, motor vehicle maintenance increased the budgeted amount.
ii. The number of staffs in the region was limited, for example there were only two
groups of tax auditors who had to move to all scattered districts in the region
which led to increase in fuel, staff travelling costs and motor vehicle
maintenance costs.

24
 iii. Absence of district office at Mkuranga forced the staffs to visit the area several
times because of large amount of tax that were collected, that led to an increase
in travelling local, fuel, lubricants, motor-vehicle maintenance costs

In the year of 2010/2011 cost of collecting tax increased by 11.2% compared to the year
2009/2010 while the tax collections increased by 30.8% from the year 2009/2010 this
implied that economy principle was achieved in the sense that the costs of collecting tax
were lower compared to the total tax collected.

Also in the year of 2011/2012 costs of collecting tax increased by 10.1% compared to
the year 2010/2011 while the collections increased by 9.8%. The proportionate increase
in the costs of collections was higher than the proportionate increase in the tax
collections. But the percentage rate of costs decreased by 1.1% compared to the year of
2010/2011, this implied that the revenue collection in the year of 2011/2012 was
collected in the cost effective way.

Following the same line, in the year of 2012/2013 the cost of collecting tax increased by
5.3% which is lower than the percentage increase in tax collection which increased by
19.4%. This has been attributed by the increase in the number of VAT taxpayers who
use the devices to from 77 in 2012 to 94 in the year of 2013 and that most of the costs
like travelling costs for the auditors, fuels expenses decreased due to the effectiveness of
the Electronic Fiscal Device Management that receives daily sales report of the
taxpayers. This has contributed to the increase in collection of taxes in a cost effective
way.

4.2.3 The extent of time that has been used in processing VAT
The researcher examined the effectiveness of the EFD machines by assessing the extent
of time that Coast region has been using to process and collect VAT from monthly to
annually before and after the placement of the phases of using the EFD machines.

From the interview made between the researcher and regional manager, regional
accountant and principal tax officer the followings were determined regarding extent of

25
time that has been used in processing VAT before and after the taxpayers started using
the EFD machines;

Before the introduction of the EFD machines TRA was assessing the amount of VAT
payable by the taxpayers based on the records prepared manual by the registered VAT
taxpayers. Based on them the auditors had to recalculate to determine their accuracy and
credibility for officers to assess tax based on them. TRA was using a day and more to
recalculate and assess the correct tax payable. But after the introduction of the EFD
machines which are associated with development of technology the taxpayer can filling
the tax returns and submit to TRA for few minutes.

Table 4.5: The effectiveness of the EFDs in processing VAT

Responses Frequency Percentage
Effective 15 78.9%
Average 4 21.1%
Ineffective - -
Total 19 100.0%
Source: Researcher’s own data-2015

According to the table above, 78.9% of the respondents said the EFD machines are
effective in processing VAT and 21.1% said that the effectiveness of the EFD machines
in processing VAT is average. The respondents envisaged that the EFD machines are
effective due to the following reasons;

i. The filling of returns of VAT has been made easier and less time consuming and
that provides for convenience to the taxpayer and higher returns to the TRA in a
cost effective way.
ii. The EFD machines send the daily sales report to the Electronic Fiscal Device
Management servers that are managed by the TRA, through them the tax evasion
and misstatement of VAT payable by the taxpayer tend to minimized and lead to
an increase in the total collection.

26
4.2.4 TRA Coast performance before and after the introduction of the EFD
machines
The followings were the findings based on the research objective of assessing the
performance of TRA Coast before and after the introduction of EFD machines. The
performances of the regions are based on achievement of their targets.

Table 4.6: The performance TRA Coast before and after the introduction of the
EFD machines
Year Annual target Actual collection Surplus/(Deficit) Performance
level
2009/2010 6,914,400,000.00 6,132,127,473.62 (782,272,527) 89%
2010/2011 7,537,700,000.00 8,022,881,886.00 485,181,886 106%
2011/2012 9,571,500,000.00 8,812,459,690.22 (759,040,310) 92.1%
2012/2013 11,537,347,852.59 10,585,347,852.59 (951,652,420) 91.75%
`
Source: Annual reports TRA Coast

From the table of above, in the year of 2009/2010 TRA Coast did not achieve the target
by performing only 89% which is lowest compared to other years after the introduction
of the EFD machines. According to the Regional manager this was caused by the failure
of achieving goal number 2 of modernize TRA operations. The TRA Coast was facing
ICT problems on ITAX that failed to capture correct and tax payables on time that
caused the targets not to be achieved on time.
In the year of 2010/2011, the TRA Coast achieved the target due to the modernization of
TRA operations that involved enforcement of EFD machines i.e. out of 69 active VAT
taxpayers TRA Coast managed to register 65 of them. This attributed to the achievement
of the target and the EFD machine boosted the collection of tax compared to the year of
2009/2010.
Following the same line, in the year of 2012/2013, TRA Coast failed to achieve the
target regardless the modernization made on its operations. The target failed to be
achieved by 8.25% which is greater than the year of 2011/2012 which was 7.9%. This
was caused by the following reasons;
Network breakdowns of the EFD machines, the system failure due to the absence of the
network made most of the unfaithful taxpayer not to send the Z report to the TRA from
which the assessment of tax payable could be based.
27
Unfaithful taxpayers on filling the returns, some of the taxpayers were not using the
EFD machines to issue receipts once the sales are made, other were underestimating
sales figures and overstating the purchases figure that made their VAT to be lower than
the actuals.

28
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction
This chapter covers the summary, conclusion and recommendations of the study

5.1 Summary
The summary of the research is based on the specific objectives of the study conducted.
Based on the specific objective of assessing the trend of actual collection of tax before
and after the introduction of EFD machines, the findings revealed that there are positive
changes on tax collections after the introduction of EFD machines because in the year of
2009/2010 Coast Region collected Tshs. 6,132,127,473.62/= while the following years
2010/2011 the collections increased by 30.8%, 2011/2012 increased by 9.8% and in the
year of 2012/2013 increased by 19.4%

Secondly, based on the specific objective of determining the cost trend of TRA Coast
before and after the introduction of EFD machines, the findings revealed that before the
introduction of EFD machines 2008/2009 to 2009/2010 the tax expenditures increased
by 47% this was caused by intensive auditing made by auditors all over the districts to
obtain correct information on the performances of the taxpayers in order to assess and
come up with the correct amount of tax. After the introduction of EFD machines from
the year of 2010/2011 the operational costs dropped to 11.2%, and 10.1%, 5.3% for
2011/2012 and 2012/2013 respectively.

Thirdly, according to the research objective that aimed at assessing the performances of
TRA Coast before and after the introduction of EFD machines, the researcher found that
in the year before the introduction of EFD machines 2009/2010 TRA Coast achieved
only 89% of the target. In the year of 2010/2011 in which the first phase of EFD
machine started to be implemented the TRA Coast achieved an outstanding performance
of 106% which was caused by modernization of its operations including EFD machines
and extensive follow up that was made by the officers to the taxpayers. Also in the years
of 2011/2012 and 2012/2013 achieved targets by 92.75% and 91.75% respectively,

29
during these years TRA Coast underperformed but achieved the targets in higher rates
than in the years when the EFD machines were not used in the collection of taxes.

Fourthly, according to the research specific objective of assessing the changes on extent
of time that TRA Coast has been using on processing VAT before and after the
introduction of EFD machines. The findings revealed that before the introduction of
EFD machines officers were taking considerably a day to analyze the sales and
purchases records of the taxpayer to come up with correct figure of VAT payable. But
after the introduction of EFD machines the officers have been using less than an hour to
assess the VAT due to the daily sales report that the EFD machines remit to TRA
officers at the end of each day.

5.2 Conclusion
Based on the findings of the research objectives, the researcher concluded that the EFD
machines are effective in enhancing tax collections due to the increase in the tax
collections after the machines started to be used, decrease in the cost of operations due
to the modernization of operations, increase in the performances by achieving higher
percentages of targets compared to the years before the introduction of EFD machines
and the decrease in the extent of time that has been used in processing VAT.

5.3 Recommendations
The researcher suggests the following recommendations to the Tanzania Revenue
Authority for improving the effectiveness of the EFD machines in enhancing tax
collections;

Firstly, the researcher suggests that the TRA Coast should ensure that every taxpayer
who has annual turnover of 14 million should comply with law by acquiring the EFD
machines in order to boost up the tax collections.

Secondly, the researcher recommends that TRA Coast should ensure that the costs of
operations increase in lower proportion compared to the increase in the actual
collections of tax in order to ensure that operating in a cost effective way and economy
principle are both achieved.

30
Thirdly, the researcher suggests that the TRA Coast should impart enough education on
the use of EFD machines to the taxpayers in order to increase the level of compliance,
accurate assessment of tax payable that will increase the chances of attaining the targets.

31
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 APENDICES

APENDIX ONE QUESTIONNAIRES FOR OFFICERS

PART ONE: PERSONAL INFORMATIONS

1. Sex

a) Male ( )
b) Female

2. Level of education of the respondent

a) Primary Level
b) Secondary Level ( )
c) College/University Level
d) Professional Level

3. Age of the respondent

a) 18-29
b) 30-37 ( )
c) 40-49
d) 50-Above

PART TWO: EFDs SENSATION

1. Are the EFD machines effective in processing VAT?

a) Effective
b) Average ( )
c) Ineffective

35
2. Give reasons of your answer above

……………………………………………………………………………………………..
..........………………………………………………………………………………………
……………………………………………………………………………………………

3. How long can the assessment of VAT take place?

.............................................................................................................................

4. Are there any changes in the time of processing VAT after the introduction of EFD
machines?

a) Yes ( )
b) No

5. What are the factors that limit the usage of EFD machines by the taxpayers?

..............................................................................................................................................
..............................................................................................................................................
................................................................................................................................

WITH THANKS

36